An annuity is normally an income for life, however, shorter terms are available. They are provided by an insurance company in exchange for a pension fund or any lump sum. The bigger the pension pot, the bigger the income will be.

More information : http://www.moneymadeclear.fsa.gov.uk/home/html

When to buy

You can buy an annuity at any age from 50 to 75 although from 2010 the minimum age increases to 55.

Before buying, it is possible to take 25 per cent of your pension fund as a tax-free lump sum on retirement.

How to buy

You do not have to buy your annuity from the same company that runs your pension. The difference between the highest and lowest annuities can be as much as 30 per cent so it is always worth shopping around. This is known as your ‘Open Market Option.’

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The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.